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May 1999

Vol. 4, No. 5 Week of May 28, 1999

BP Pipeline (Alaska) Inc. gets new business unit leader

Anne Drinkwater named to head unit at first of year; pipeline safety issues a major concern for companies which own the line

Kristen Nelson

PNA News Editor

Pipelines, trading and transportation — everything that helps BP Exploration (Alaska) Inc. get oil from the North Slope to the marketplace — falls under the umbrella of BP Pipelines (Alaska) Inc.

Anne Drinkwater became business unit leader for BP Pipelines (Alaska) at the beginning of the year. A 20-year BP veteran, Drinkwater has a degree in mathematics and statistics and has worked on the commercial side of the company. She started in the North Sea Forties field and has worked on new business ventures in Algeria and Mozambique, and looked after BP’s commercial interests in France and most recently in the Gulf of Mexico.

This is the first assignment, Drinkwater told PNA in a March interview, where her focus has been purely on the pipeline-transportation end of the business. Drinkwater said she had some elements of that in her Gulf of Mexico assignment because BP owns part of the of the major pipelines there.

Pipeline safety issues a main concern

Drinkwater is BP’s representative on the trans-Alaska pipeline owners’ committee. The owners’ committee, she said, doesn’t run the pipeline. “Alyeska runs the pipeline,” she said, “and we don’t try and interfere in their operational day-to-day issues.

“What we do try to do is to provide them with some guidance on areas that we see deserve more work or more vigilance.” A key issue, she said, is “making sure that as the pipeline goes on, that we’re maintaining the highest environmental and safety standards.” That isn’t new, but, she said, “you only carry on achieving that if you’re looking at it all the time. If you take your attention off of it for a moment it tends to come up and bite you.”

Because environmental and safety standards are a priority, she said, “we talk a lot about the kind of programs — safety and environmental programs — that Alyeska has.” In addition to ensuring the continuation of the pipeline’s safety and environment record, Drinkwater said, another ongoing issue “is maintaining the response capability to the highest standard.”

The owners, she said, collaborate on “some of the broader strategic issues that Alyeska’s facing” while competing on tariffs for the pipeline and also competing to move oil through their portion of the line. BP could move its own oil, but could just as easily move oil for another producer, depending on tariffs — which are separately figured by the different owners.

Cost an important factor

The owners also focus on the challenges of getting product to market in a cost-effective way as production falls and the volume of oil moving through the pipeline declines. Drinkwater said that costs for the pipeline have to be kept “in the right place in the future so we can compete.”

One way to tackle cost issues, she said, is “by understanding how other people run their pipelines — using bench marking, that kind of thing — to look at areas we could manage.” One thing the owners’ committee does, she said, is to draw on the experience of owners with other pipeline operations “to see what’s going on there and see if that will hold any benefit for Alyeska.”

Upstream costs have fallen quite dramatically over the last several years, Drinkwater said, and the issue becomes “how we do the same thing on the pipeline side while always having that kind of sharp eye on safety and everything. Because that’s of fundamental importance. We are not going to do anything that detracts from what we see as being an exemplary record over the last 10, 20 years.”

Sometimes, she said, resolutions to safety or environmental issues can end of saving money. “Looking at different ways of doing tank washing and recycling, that’s saved us money,” she said.

Planning, construction, quality programs

Drinkwater said that other pipelines owned by BP, like its majority interest in the Badami pipeline, are operated by the same unit which produces the field. “We tend to get very involved when one of the pipelines is being built or we get very involved in the inspection and quality program,” she said of the role played by BP Pipelines. BP Pipelines, Drinkwater said, is involved in planning and overseeing construction. “And we get very involved in the various quality programs that we like to introduce to make sure that the lines are all running effectively.”

Future owner company challenges

Drinkwater said that over the next few years the challenge “should be a continuing chase to make sure the integrity of the line is intact. That’s got to be kind of out there as the first thing. I mean that might sound kind of dull, but I keep on going back to the point that if you stop watching something and you kind of pull back a bit on being vigilant, then things will start to go wrong. So it’s keep on driving for that kind of higher standard of excellence in pipeline transportation. That’s what I would see as the thing that is going to mark the next five years.”

Every pipeline is different, she said, “because of the environment it’s in and the type of product that it’s carrying and the structural strains on it.” Especially with something as significant as the trans-Alaska pipeline, she said, maintaining the line in good condition “is a case of having a really good program that’s tailored to that line.” The Joint Pipeline Office, she said, with both federal and state agencies unified, is well placed to work with the owners and Alyeska on maintaining the line.





GTL plants need state and federal support

Significant regulatory and financial obstacles stand in the way of an economically feasible gas to liquids plant on the North Slope, said Richard Peterson, president of Alaska Natural Gas to Liquids Co., and cited six elements that would make the project more attractive:

• Establishment of a tax-free industrial trade zone to include the GTL facility on the North Slope and additional facilities in Valdez.

• The ability to issue tax-free revenue bonds to finance the project’s debt. The lower interest rates would allow a higher net-back price to the gas owner.

• A federal diesel motor fuels tax exemption to help cover the costs of building and operating a GTL plant on the North Slope. Peterson said that anybody who wants to build a GTL plant anywhere in the United States should get the fuels tax exemption.

• State support for modification of the pipeline to provide for batching of syncrude.

• State ability to enter into a binding agreement prohibiting unilateral change by future legislatures.

• State and/or North Slope producers agreement to enter into a 25 year flexible base net-back contract with Alaska Natural Gas to Liquids for 500 million cubic feet of natural gas per day.


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